Quarterly Economic and Market Review (Hancock Whitney)

Summary

• The S&P 500 gained 2.3% in the third quarter, a sharp slowdown from its 15.2% advance in the second quarter.p.3
• The Federal Reserve raised rates by 25 basis points to a target range of 3.75% to 4.00% in a unanimous 12-0 vote, its first hike since 2023.p.12
• The 10-year Treasury yield rose from 4.47% on June 30 to 5.3% on September 30, while WTI crude traded above $90/barrel versus $69.50 on June 30.p.10
• The S&P Mid Cap 400 Index was down 6.4% while the S&P Small Cap 600 Index declined more than 7.9%.p.9
• First-mover AI adopters account for 25% of the labor force but produce 43% of Real GDP.p.8
• The Bloomberg US Aggregate Intermediate Index closed the third quarter down -2.56%.p.13
• CBO projects a fiscal 2026 deficit of approximately $2.1 trillion.p.15

Key insights

1. Core PCE inflation topped out at 3.2% Y/Y in May, well above the Fed's 2% target.p.6
2. Productivity among first-mover AI adopters grew 4.8% Y/Y in the second-quarter update.p.8
3. The S&P 500 Equal Weighted Index declined 1.9% in the third quarter.p.9
4. The MSCI EAFE Index gained 0.8% while the MSCI Emerging Markets Index declined 0.4%.p.9
5. The 10-year Treasury yield surged 82 basis points to 5.29%, and the 2-year yield rose 72 basis points to 4.89%.p.13
6. The S&P Global U.S. Flash PMI surged to a 62-month high of 58.4 in September.p.12
7. Roughly 20% of global petroleum products pass through the Strait of Hormuz.p.14
8. The U.S.-Venezuela energy agreement opens development rights to 17 oil fields with more than 65 billion barrels of proven reserves.p.14
9. The U.S. imposed 50% tariffs on selected Canadian goods after negotiations failed in August.p.15